Gibraltar has experienced major growth since the 1967 Companies Ordinance Act. Guy Canessa of the Gibraltar Finance Centre outlines the positive developments that have taken place since then
Gibraltar's financial services centre traces its launch to the enactment of the Companies (Taxations and Concessions) Ordinance in 1967. Great strides have been made since those early days, to the extent that although the traditional trust and corporate services work is still fundamental, the finance centre now encompasses a wide range of activities to include sectors such as captive and third-party direct-writing insurance, fund management and fund administration, and derivatives trading.
Insurance has moved ahead in recent years to become the fastest-growing sector. As an indication of this growth, the number of licensed insurance companies has more than trebled from just 13 in 2000 to over 40 at present.
There has been a marked increase over the past few years of the establishment in Gibraltar of insurance companies writing third-party business directly into the UK market. Direct writers have moved their businesses to Gibraltar for a number of reasons: the speed and efficiency with which Gibraltar's regulator, the Financial Services Commission, is able to license an insurance company, the opportunity to obtain security of capital rather than relying on funding from third parties, and the tax-efficient residence programme available to directors and employees relocating to Gibraltar.
Captive insurance is also posting solid growth. There are currently 12 captive insurance companies present in Gibraltar. However, if one were to count the cells within the two cell captives established in Gibraltar - a contractual cell company and a protected cell company - as captives in their own right, the number would be significantly higher.
The granting of insurance passporting rights in 1997, coupled with the enactment of the Protected Cell Companies Ordinance in 2001, signifies that Gibraltar is unique within the EU in that it can offer passporting of insurance services throughout Europe in combination with a protected cell structure.
Investment services is the second major growth area. Under EU passporting rights confirmed in July 2003, investment services providers based in Gibraltar and authorised by the Financial Services Commission may operate in other member states on the basis of their Gibraltar authorisation and in accordance with established procedural requirements.
The number of locally-licensed investment firms has risen steadily from 11 at the end of March 1998 to 27 as of the end of March 2004, and a substantial number of portfolio management companies that have established themselves in Gibraltar have a connection with Switzerland.
A third growth area worth highlighting is derivatives trading. Availing themselves of the attractive package that Gibraltar has to offer in terms of business infrastructure and improved lifestyle, a number of derivatives traders have set up on the Rock in recent years.
FCT announced in April 2004 that it had established direct connectivity with the Chicago Mercantile Exchange from Gibraltar, and Mac International Holdings opened a state-of-the-art 100-desk trading floor in Europort in May 2004. Both are now able to trade directly from Gibraltar on the four major exchanges, namely Chicago Mercantile Exchange, Chicago Board of Trade, Eurex and Liffe.
One of the attractions of trading from Gibraltar is that a trader can apply to the Finance Centre Director for Qualifying (Category Three) Individual status. Under the Category Three Rules 1998, which fall under the Income Tax Ordinance, traders would only have to pay £10,000 tax per year, in 12 equal monthly instalments.
Applicants for Category Three status under the 1998 Rules must possess skills or experience essential to the operation of a company, which are not available in Gibraltar, and which are important for the Rock's economic development. In order to qualify for the status, they are required to have a suitable property in Gibraltar, either purchased or rented, for their exclusive use throughout the year.
The Finance Centre
The Government's Finance Centre Department is charged with marketing and promotion of financial services, together with input into strategic planning including the various international initiatives, product development and liaison with the private sector and the independent regulator (the Financial Services Commission).
Formerly a Division of the Department of Trade and Industry, the Finance Centre - established in 1997 - was set up as a separate department following a ministerial reshuffle in the wake of the general election held in Gibraltar on 27 November 2003. At that time, responsibility for the financial services sector was transferred from the minister for trade and industry to the chief minister. The revised portfolio better reflects the synergy with the government's finance and treasury function, for which the chief minister is responsible.
Following a series of four successful conferences held in London in 2003 - on insurance, funds, private clients and e-business - the Finance Centre held a Gibraltar Insurance Seminar in Geneva, Switzerland, in March 2004. It also participated in three major insurance conferences and exhibitions in 2004: RIMS (Risk and Insurance Management Society) in San Diego, US, in April, Luxembourg Rendez-Vous in May, and VCIA (Vermont Captive Insurance Association) in Burlington, Vermont, USA, in August.
An article on Gibraltar's financial service centre would not be complete without a mention of the government of Gibraltar's record of full co-operation with all the relevant international bodies.
In October 2000, Gibraltar was the first jurisdiction to volunteer to undergo the full range of Module 2 assessments by the International Monetary Fund on banking, insurance, investment services, and trust and company management (Gibraltar has regulated trust and company management since 1989, ahead of most other jurisdictions).
The IMF noted in its report that Gibraltar "is at the forefront of the development of good practices." It further stated: "It is worth noting that Gibraltar was one of the first jurisdictions to have introduced regulation and supervision of the company and trust services business." The IMF concluded that Gibraltar's regulator, the Financial Services Commission, "carries out its duties diligently and has an intimate knowledge of the institutions under its supervision. The results of our assessments indicated that supervision is generally effective and thorough and that Gibraltar ranks as a well-developed supervisor. The regulatory regime across the industry meets most international standards and accords with best practice."
Significantly, Gibraltar was among the first wave of countries and territories to be granted Qualified Intermediary status by the US Internal Revenue Service in October 2000, signifying that Gibraltar's know-your-customer rules were regarded as acceptable by the US.
As regards the OECD, the Government of Gibraltar submitted a letter of commitment to transparency and effective exchange of information on 27 February 2002. Gibraltar's approach has consistently been one of constructive dialogue with the OECD. The OECD has itself also recognised the importance of a global level playing field and of a role for all jurisdictions in developing international standards to ensure the fairness and success of its own objectives to eliminate harmful tax practices.
The government is confident that jurisdictionally Gibraltar is held in high regard by the OECD and is considered to be fundamentally co-operative internationally. It should nevertheless also be pointed out that many of the objectives of the 1998 OECD report on so-called 'harmful tax practices' are already reflected in Gibraltar's laws and administrative practices.
Gibraltar was reviewed fully by the Financial Action Task Force and classified as a co-operative jurisdiction in June 2000. The FATF simultaneously published a list of 15 non-cooperative jurisdictions. Gibraltar complies fully with internationally-accepted standards and, indeed, was the first offshore financial centre to introduce all-crimes money-laundering legislation (which includes terrorism-related offences) in 1995.
In a report made public in November 2002, the Financial Action Task Force endorsed the robust anti-money laundering regime in place on the Rock. The 'Mutual Evaluation Report on Gibraltar' was produced by the FATF under the aegis of the Offshore Group of Banking Supervisors (OGBS), of which Gibraltar is a member.
The FATF concluded in its report that Gibraltar has a comprehensive legal framework and administrative arrangements in place to fight money laundering, and it recognised the commitment of the Government and the authorities in Gibraltar in that regard. The report stated:
"Gibraltar has in place a robust arsenal of legislation, regulations and administrative practices to counter money laundering. The authorities clearly demonstrate the political will to ensure that their financial institutions and associated professionals maximise their defences against money laundering, and cooperate effectively in international investigations into criminal funds. Gibraltar is close to complete adherence with the FATF 40 Recommendations."
In summary, Gibraltar offers international investors an attractive package comprising a modern business infrastructure, coupled with direct access to EU financial services markets and backed by strong and effective regulation. The lifestyle that accompanies living and working in a Mediterranean climate is also an important part of the appealing package.
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